A re-examination of the original foundations of Anglo-American trademark law.

AuthorRamirez-Montes, Cesar

ABSTRACT INTRODUCTION I. THE MODERN NARRATIVE OF TRADEMARK LAW II. A HISTORICAL OVERVIEW OF TRADEMARK LAW: ANOTHER LOOK A. The Early Development of Trademark Law in England 1. Fraud as the Normative Basis of the Early Intervention 2. Fraud Under Attack 3. The Shift to Property as the Jurisdiction of Chancery 4. Trademark Law in the Common Law and Chancery Courts III. THE AMERICAN EXPERIENCE A. Early American Jurisprudence Revisited 1. Fraud as the Normative Basis of Trademark Doctrine 2. The Shift to Property Interests 3. A Compromise between Property and Fraud IV. A BALANCED TRADEMARK DOCTRINE: THE TRUE BASES A. What Master Does Trademark Law Serve? 1. The Private Interests of Traders 2. The Interests of Consumers B. Trademark Law as a Balancing Theory of Interests 1. The Judicial Struggle without the Balanced Approach 2. The Return to Balancing Conflicting Interests V. CONCLUSION Introduction

According to traditional accounts of the normative basis of Anglo-American trademark law, the purpose of the law was to protect the interests of consumers in not being misled by the unauthorised use of others' marks. In recent work, Mark McKenna has offered a different account of the law. as having developed to protect the interests of traders in not having their customers diverted to competitors using their marks. According to McKenna, early trademark law served one master only, the trader, with any additional benefit to consumers being incidental and unintended. In this Article, I challenge both accounts. Through an extensive analysis of the common law and chancery decisions from the nineteenth century, I argue that early trademark law was not driven by a judicial desire to vindicate any specific private interest, but rather by a concern on the part of the courts with balancing the interests of consumers and traders in pursuit of a different goal, namely, honest competition.

This Article proceeds in four parts. Part I sets the scene for the discussion by describing the modern narrative of trademark law heavily influenced by economic principles. Part II goes on to revisit the early development of trademark law in England. From this historical analysis, the notion of fraud as the original basis of the doctrine, both at Law and in Equity, clearly emerges. It then chronicles the assault of the property basis, largely instigated by the decisions and legal thinking of mainly Lord Westbury and the consequent breakaway of the legal doctrine from its common law origins. In this connection, I critique the decisions often cited for the proposition that consumer interests were secondary and suggest that those decisions must be read in their own context. Part III continues to examine the evolution of the law in America and reveals, perhaps unsurprisingly, that the legal theory underwent a similar normative upheaval in the middle of the nineteenth century. It will emerge, however, that there were many considerations underlying the early intervention of American courts.

Finally, Part IV will outline the longstanding debate over which master trademark law actually sought to serve: the trader or the consumer. In this regard, I argue that there has never been an absolute master and, for this reason, academic suggestions to the contrary are questionable. Instead this Article will conclude that, notwithstanding the jurisdictional basis, the law has always sought to accommodate between many relevant interests: the traders', consumers', and competitors'.


    It has become customary for contemporary legal scholars to explain trademark law by reference to the economic function that trade symbols perform in the marketplace. On the one hand, trademarks are said to enable consumers to identify confidently goods or services that have been satisfactory in the past and reject those that have failed to live up to their expectations. (1) By unequivocally identifying the source of the goods consumers want to purchase, trademarks are also said to aid in minimizing consumers search costs, because once satisfied consumers come to identify a reliable and satisfactory mark, they will have no need to shop further and try other goods of the same kind. Trademarks are considered particularly useful in helping consumers to identify the unobservable features of marked products; (2) thus, they provide truthful information, in easily accessible form, on which consumers rely to make purchasing decisions. (3) On the other hand, by assuring the trademark owner that satisfied consumers will keep looking for those goods bearing her mark, trademarks encourage the owner to invest in the goodwill represented by her mark; the resources that the producer is prepared to spend in improving and maintaining product quality in the knowledge that it will be her, and not someone else, who will recoup the expenditures simultaneously promote consumer interests. Accordingly, the interests of both consumers and producers would appear harmoniously accommodated. But ultimately, under this modern narrative, the normative goal of trademark law is to "foster the flow of information in markets, [and thereby,] reduce search costs for consumers." (4)

    Nonetheless, for trademarks to achieve these "basic" objectives, it is essential that the law intervenes to ensure that the flow of accurate product information and reduction in consumers' shopping costs remains undistorted. Distortion may arise when dishonest traders, using someone else's mark, seek to mislead the public about the source of the goods by selling their own goods as the goods of another. As a result of unauthorised uses, the trademark owner is deprived of the benefits of her efforts and investments, as reflected in her product reputation, while consumers are tricked into buying an item they did not intend to buy. To avoid this undesirable situation, the law recognizes that some degree of exclusivity or control ought to be available for the trademark owner. (5) Thus, the "legal scope of protection of a trademark against infringement by others is defined by the likelihood of confusion." (6) In this context, trademark law seeks to prevent the existence of identical or confusingly similar marks whose use will create confusion in the minds of consumers. This concern for preventing consumer confusion is said to have been the "lynchpin" throughout the evolution of the legal doctrine (7) and is understood to anchor the law to policies that protect the quality of information transmitted to consumers. (8)

    Conversely, competition is ensured, as third party uses are not prohibited absent misrepresentation regarding the product or confusion as to the origins of the goods. That is, the scope of exclusivity of a trademark finds its limits in the prevention of consumer confusion. (9)

    More recently, however, it has been observed that the economic view that trademark law was designed to lower consumer search costs is rampant in the legal literature. (10) Essentially, the economic theory of trademark law posits that "trademark law ... can best be explained on the hypothesis that the law is trying to promote economic efficiency." (11) The modern account of the law described above draws heavily on this theory. Some commentators view the economic arguments as "forceful," (12) while others regard them as the "classic" justification for recognizing enforceable rights in trademarks. (13) Similarly, other opinions would appear to consider the economic paradigm as appropriate to explain the early tortious elements of trademark law. (14) Yet, the influence of these economic doctrinal analyses in the United States is hardly surprising when we look at the statutory considerations for enacting trademark legislation in the last century. When the Senate passed the Lanham Act, the federal trademark statute in the United States, the Report of the House stated that trademarks are indeed the essence of competition, because "they make possible a choice between competing articles by enabling the buyer to distinguish one from the other," while at the same time, "encourage the maintenance of quality by securing to the producer the benefit of the good reputation which excellence creates." (15)

    Likewise, in Europe, similar language can be found in the Memorandum on the Creation of an EEC Trademark, which outlined the reasons for a Community system of trademarks. Having recognised that trademarks are an indispensable means of promoting trade, the Memorandum then proposed a trademark system in which, by preserving its distinguishing function, the trademark can fulfil its further role "as an instrument of sales promotion and consumer information" and, at the same time, "its function of protecting the proprietor against injury to the reputation of his trademark." (16) Furthermore, in discussing the basic objectives of trademark law, the same view seems to have been echoed in the decisions of the highest court in the United States (17) and by the opinions of the advocate generals to the European Court of Justice (ECJ). (18) It is small wonder, therefore, that Barton Beebe had recently indicated that "[t]he influence of this [economic] analysis is now nearly total.... No alternative account of trademark doctrine currently exists." (19)

    The supporters of the economic account have, therefore, described the goal of trademark law as serving a dual purpose: first, economizing consumers' search costs; and second, rewarding the producers' investment. Nonetheless, they generally argue that, while the interests of the producers are part of the rationale behind trademark protection, the interests of the consumers are far more important and should be the only concern motivating the protection. These remarks are frequently made in the context of the debate that pits dilution law against "traditional" trademark protection. For instance, in referring to the apparent conflict between the two theories, it has been argued that dilution law is...

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